SunTrust Mortgage, Inc. could pay up to $320 million in remediation fees under a new agreement to settle claims related to the company’s alleged neglect and mishandling of the federal Home Affordable Modification Program (HAMP).
Atlanta-based SunTrust Banks, Inc. (NYSE: STI) reached the recent agreement with the United States Attorney’s Office for the Western District of Virginia.
“Instead of helping distressed homeowners, SunTrust’s mismanagement drove up foreclosures, disseminated individual credit and increased costs for hardworking men and women across our nation,” says Attorney General Eric Holder in a news release.
As part of the agreement, SunTrust Mortgage must pay $179 million in consumer remediation, up to a maximum of $274 million if necessary; $20 million to fund housing counseling for homeowners; $10 million paid toward restitution to the Federal National Mortgage Association and Federal Home Loan Mortgage Corporation; and a cash payment of $16 million to the United States Treasury. The company will incur a $204 million pre-tax charge in the second quarter of 2014 as a result of this agreement.
HAMP was intended to assist homeowners in dire straits, but SunTrust, a TARP recipient, allegedly ruined many through its neglect of its HAMP program, says Christy Romero, Special Inspector General for TARP (SIGTARP), adding that many homeowners would have been better off never having applied through the bank in the first place.
As part of the agreement, an independent claims administrator will be appointed and communicate with borrowers who may be entitled to compensation under the agreement. The settlement also includes provisions that SunTrust will increase loss mitigation staff, monitor their mortgage modification process, and provide semi-annual reports regarding compliance with the agreement.
“We recognize that there were deficiencies in our administration of HAMP during the recession, and through the improvements we have made to our internal processes and this restitution plan, we are demonstrating our commitment to meet the high standards that we set for ourselves and that our customers expect,” says Jerome Lienhard, president and CEO of SunTrust Mortgage.
Moving forward, the nation’s largest banking organization will focus on the future and support of the housing recovery, Lienhard says.
As of March 31, SunTrust had total assets of $179.5 billion and total deposits of $133 billion.
Written by Cassandra Dowell